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Mining industry

Copper Market in Surplus, Mergers Spark Market Hopes

Strategic Insights

— 2 min read

The global refined copper market has experienced a significant surplus, with preliminary data indicating a 15,000 metric ton surplus in March. This surplus increases to 59,000 tons after making seasonal adjustments, according to the International Copper Study Group. The takeover battle for Inco Ltd. and Falconbridge Ltd. has sparked market hopes, with analysts suggesting that the merger could lead to the fast-tracking of new projects and enhance competition in the market.

Key Takeaways:

  • The global refined copper market has been in surplus by 15,000 metric tons in March, or 59,000 tons after seasonal adjustments, according to the International Copper Study Group.
  • The takeover battle for Inco Ltd. and Falconbridge Ltd. has sparked market hopes, with analysts suggesting that the merger could lead to the fast-tracking of new projects and enhance competition in the market.
  • Phelps Dodge Corp.'s bid for Inco Ltd. and Falconbridge Ltd. may threaten Xstrata PLC's plans, but analysts say it's too soon to write off the Anglo-Swiss company's ability to grow by acquisition.
  • Refined zinc production stood at 3.502 million metric tons from January through April, up 3.0% on the same period a year earlier, according to the International Lead and Zinc Study Group.
  • Copper prices will remain far above historical norms until late 2007, outperforming other base metals on the basis of strong supply and demand fundamentals, according to Societe Generale.
  • Base metal prices are likely to see little reaction in the shorter term from the merger news, but the longer-term picture could lead to increased competition and market growth.
  • Australia's chief commodities forecaster predicts that prices of most base metals will ease back from current levels over the next 18 months as supply finally catches up with demand.
  • Copper futures surged in New York on Monday, driven by a rise in U.S. housing starts, fund buying, technical considerations, and news of the planned merger between Phelps Dodge Corp., Inco Ltd., and Falconbridge Ltd.

Statistics:

  • 15,000 metric tons: Surplus in global refined copper market in March
  • 59,000 tons: Surplus in global refined copper market after seasonal adjustments
  • 3.0%: Increase in refined zinc production from January through April compared to the same period the previous year
  • 3.502 million metric tons: Refined zinc production from January through April
  • 40 billion: Total value of Phelps Dodge Corp.'s bid for Inco Ltd. and Falconbridge Ltd.
  • 20 billion: Financing secured by Phelps Dodge Corp. for its bid for Inco Ltd. and Falconbridge Ltd.
  • 18 months: Timeframe in which Australia's chief commodities forecaster predicts base metal prices will ease back from current levels

Sources:

  • International Copper Study Group
  • Dow Jones Commodities News
  • Phelps Dodge Corp.
  • Inco Ltd.
  • Falconbridge Ltd.
  • Xstrata PLC
  • Societe Generale
  • International Lead and Zinc Study Group
  • Australia's chief commodities forecaster
  • Comtex SmarTrend
  • Comtex News Network, Inc.

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